As the regulatory debate continues mainly between government agencies and cryptocurrency protagonists, the Central Bank of Kenya (CBK), through its Governor, Patrick Njoroge joins in the campaign towards slowing down the propagation of Bitcoin and cryptocurrencies.
A Recurrent Warning
Njoroge told legislators on Thursday that he had sent a circular to all banks warning them on the dangers of dealing in virtual currencies. According to him while addressing the National Assembly Committee on Finance at Parliament Buildings, the circular cautioned the banks against dealing in virtual currencies or transacting with entities that are engaged in virtual currencies.
This is not the first time that the CBK is getting involved in moves to discourage the country’s citizens from getting involved in what has been popularly described as a risky venture by most regulators. It can be recalled that in December 2015, the consumer protection concerns led CBK to issue a notice warning the public against virtual currencies such as Bitcoin.
These warnings are not peculiar to the CBK alone or to Kenya. In a previous article on CCN, it was reported how the Manager at Nigeria Deposit Insurance Corporation (NDIC) warned citizens of the lack of insurance on any investment in virtual currencies, qualifying them as very risky ventures that are not backed by any physical commodity, such as gold or other precious stones.
In the same trend, just last Wednesday, World Bank Group Senior Vice President Mahmoud Mohieldin said that Blockchain technology may have many good uses in the world, but Bitcoin “could be the biggest bubble in history.” This statement reinforces the recurring question that seeks to address if blockchain technology can be isolated from cryptocurrencies, and how possible it is to adopt the technology without implementing its underlying tokens – cryptocurrencies.
Yes to the Blockchain, no to Cryptocurrency
If one would study the tone of these spokespersons in their criticisms so far, it is easy to deduce that while they may have warned against the adoption of these tokens as elements of value, hence investment vehicles or currencies for transaction, none has outrightly noted on the possibility of token extinction. Therefore, adopting the technology and denying the value of their underlying tokens introduces an entirely different dynamics to the debate.
Imagine the possibility of accessing and implementing specific blockchains and acquiring their underlying tokens at absolutely no costs. This will automatically redefine the total industrial dynamics of the ecosystem. The questions that would arise in such cases would be the basis of token supply and distribution, and the possibility of maintaining order within such an industry, without a marketplace.
Considering the current stage in the development of blockchain technology, the existing debates and resistances can be considered as normal and beneficial challenges. So far, there have been improved protocols that reflect more balanced implementations, compared to the very early blockchains. These can be credited to research and development exercises, born out of criticisms such as seen from regulatory agencies.
While the industry continues to grow and traditional systems try to find the most appropriate ways to get involved, the role of cryptocurrencies need to be properly defined. Rather than the initial hype by most enthusiasts of the new technology, or the blanket condemnation by traditional agencies, more objective steps are necessary. This will ensure a better defined ecosystem where maximum value can be achieved from a technology that is quickly finding universal approval.